Is PayPal Stock Still a Buy After a Revenue Miss?

PayPal Holdings (PYPL) stock is spiraling Tuesday after the payments giant reported mixed results for its third quarter and raised its full-year profit forecast.

In the three months ended September 30, PayPal's net revenue increased 5.8% year over year to $7.8 billion, driven in part by a 5.7% jump in payment transactions to 6.6 billion. Meanwhile, its earnings per share (EPS) were up 22.5% from the year-ago period to $1.20.

"PayPal delivered strong financial and operating results during a highly productive third quarter," said CEO Alex Chriss in a statement. "We are making solid progress in our transformation as we bring new innovations to market, forge important partnerships with leading commerce players, and drive awareness and engagement through new marketing campaigns."

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The company's top and bottom-line results were mixed compared with analysts' expectations. Wall Street was anticipating revenue of $7.9 billion and earnings of $1.07 per share, according to Yahoo Finance.

PayPal's total payment volume increased 9% year-over-year to $422.6 billion in the quarter, driven by active accounts increasing 0.9% to 432 million and payment transactions per active account rising 8.5% to 61.4.

For the fourth quarter, PayPal said it anticipates low single-digit revenue growth and a low to mid-single digit decrease in earnings. And for the full year, it now anticipates earnings growth in the high teens, up from its previous forecast of low to mid-teens growth.

"We are raising our full year non-GAAP guidance and are pleased with the strength we are seeing across the business," Chriss said. "We've built a solid foundation in this last year that will serve us in the years to come."

Is PayPal stock a buy, sell or hold?

Heading into Tuesday's session, PayPal was up 36% for the year to date, easily beating the S&P 500's 23.5% total return (price change plus dividends). And most of Wall Street thinks the financial stock has more room to run.

According to S&P Global Market Intelligence, the average analyst target price for PYPL stock is $85.58, representing implied upside of roughly 10% to current levels. Additionally, the consensus recommendation is Buy.

But not everyone is all-in on the large-cap stock. Financial services firm Morgan Stanley has an Equal Weight rating (equivalent to a Hold) on PYPL with a $71 price target.

"PayPal's massive online acceptance lead and industry-low attrition can support growth that's in line with overall e-commerce," wrote Morgan Stanley analyst James Faucette in an October 24 note. "Improvements in operational efficiency along with ongoing share repurchases can also support low-teens EPS growth."

However, Faucette expresses concerns over PayPal's strategic direction, citing slow progress in improving Branded Checkout, doubts about Venmo's monetization potential among Gen Z and Gen Y shoppers, and uncertainty about the company's investment priorities and ability to execute key strategies.

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